Convenience has made the technology commonplace in retail
Contactless technology first appeared on the payments scene about two decades ago when the Seoul Bus Transport association launched the first contact less payment card (UPass) for commuters. Introduction of the EMV standard paved the way for contactless credit and debit cards, that gradually replaced the older magnetic stripe cards over the next decade or so. Introduction of NFC technology in smart phones led to the incorporation of contact less payment technology in mobiles, leading to the development of mobile payment systems and digital wallets. Thus between transport cards, contactless payment cards, and wallet apps on the phone, we now have access to multiple methods of contactless payments that have subtly simplified our lives. In this article we take a step back to analyze the pros and cons of contactless payment technology that both consumers and business owners need to be aware of.
- Speed and convenience: Contactless payment cards are probably the most popular method of paying for transport across the world. This is because they offer faster and more convenient card processing which is the top most requirement for people in a hurry to reach their workplaces during the morning rush hours especially in urban areas. Moreover they can be used without removing them from the wallet thus saving a few more precious seconds. These seconds for a large number of people add up and keep the crowds moving at key stations and bus stops. This is also useful when making payments at convenience stores and café’s where the purchases may be of a significantly lower value and both retailers and consumers would prefer the payment process to be quick and on the go.
- Variety of devices: There are variety of ways in which contactless payments can be made. NFC chip technology can be incorporated into any number of devices allowing them to make payments. Thus we have not only contactless cards, but also smartphones, key fobs, and vehicles that can automatically make toll payments. NFC implants are also now available for humans.
- Security Features: EMV chip technology is considered to be more secure than the older magnetic stripe card technology as it uses cryptography to protect transaction data and it is difficult to read the data available on the chip. With contactless payments, the card never leaves the customer, so as long as the customer is careful with it, it is almost impossible to steal the card or the data on the card. Contactless payments are PCI compliant which is a great benefit for businesses
- Variety of features: Since contactless payments are supported on smart phones, all the smart phone features become available. This includes biometric authentication, remote deactivation, pin protection, virtual card provisioning, loyalty programs pushed to the phone etc. Smart phones also provide opportunities for innovation and addition of new features.
- No Additional Fees: Merchants who accept contactless payments are not required to pay any additional fees to card companies. They are only required to install suitable card readers.
- Multiple cards: Usually people today carry a couple of payment cards, transportation cards, identity cards etc in their wallets. Payment without removing the card from the wallet is not really as advisable when you are carrying multiple cards, because the reader may not be able to identify the correct card to be used. At such times it is advisable to remove the specific card you wish to use from the wallet to make the payment or configure all cards in to a wallet app and use the app instead.
- High value transactions: While contactless cards may be more secure than magnetic stripe cards, it is usually a best practice to set an upper limit for contactless use of cards and use chip and pin for high valued transactions. This is because stolen cards can be used without any form of authentication, and prevents greater loss in case a card is stolen.
- Acceptance: All stores may not support contactless payments. Thus users cannot go completely wallet free yet. Similarly the older generation may not appreciate payment without any authentication so much and would prefer chip and pin transactions to a contactless system.
Despite the above issues, more and more businesses have started accepting contactless payments and millennials are heavily relying on contactless payments through wallet apps. Due to the convenience and speed offered, contactless payments seem to be the norm for both current and future payment systems.
Written by: David Smith